Online to Offline cross-sales in retail banking

(This post is part of a series on the state of multichannel metrics today, one year after the book came out.)

The previous post focused on a travel company that listens to their customers’ online behavior so to get their cross-sales – or last minute – offers to those who are most likely to care.

Now how about the retail banking industry?

Retail banks and credit card companies have been great innovators in the use of analytics for direct and relationship marketing. For example, the case of CapitalOne is well described in the book Competing on Analytics.

For good reasons:

1. Banking is a relationship business.
2. Banks know embarrassingly much about their customers based on all those transactions and other data
3. And what is the profit from a new bank customer at the moment when they first open their account? Negative, probably, until over the life time of the relationship the bank makes back their initial costs (and then some)
4. Banks have learned that they are most successful with cross-selling products to customers within the first 30 to 90 days of the relationship. After that, customers seem to go on auto pilot with their relationship.
5. Banks also have learned that new customers are most at risk in the beginning of their relationship and may spring back to their previous bank if something goes wrong.

So banks plan out all their customer communications very carefully by predicting which offer or message sent to which customer at what time is most likely to amount to maximized net present value.

(You might joke that we wouldn’t have the stupid mortgage crisis today if the direct marketing departments had been in charge of their banks)

So why is it then that many banks are such laggards when it comes to online offline integration?

Few industries have it easier.

• You visit your bank’s web site frequently
• You are almost always logged into your account when you go to your bank’s web site.
• There is a big incentive for not deleting your cookie so that you won’t have to go through all those annoying security questions to “register” your computer.
• Quite likely you even clicked the “remember my user ID” option so that even the bank’s home page greets you with “Hi Joe, welcome back”

All your bank’s products are outlined online so you have it easy to answer your own questions.

Looking for a car loan or savings account?

Likely you check rates online.

So … hellooo … is anyone listening?

Customer 1:  European bank cross-sells savings accounts

It seems a no-brainer.

The bank, with the help of a nifty online marketing consultant, mined their web analytics and customer data for clients who

• have a checking account
• but no savings account
• YET who have recently been on the web site looking at savings rates.

All it took was a feed from web analytics looking at web pages relating to savings accounts and keyed by login-name of customers.

For extra credit, they could have extended the campaign to those who weren’t logged in but whose cookie was previously registered during an authenticated session.

According to the consultancy, the campaign was easy to do and very lucrative. So they are expanding the program.

Customer 2: Stock brokerage looks at web data to cross-sell options-trading

Another no-brainer.

Options-trades are a great way for an online stock brokerage to increase transaction volume and to lock in clients into a tighter relationship.

But options are risky and somewhat more complicated than trading stocks. So they aren’t everyone’s cup of tea.

Who is ready to receive the cross-sales offer?

Could it be those clients who are not yet authorized for options trading but who have recently been on the web page studying the process of how to sign up for options trading?

You betcha!

So what are the couch potatoes waiting for?

Legitimately, banks want to make sure that they stay within the accepted norms for privacy. The online-offline integration feels very new to them. So bankers are quick to throw up their arms and say that their hands are tied by the privacy rules of their organizations.

Are banks really that concerned about our privacy though?

Every night banks crunch through our daily account transactions to watch for unusually large deposits so that they can quickly bring us a cross-sales offer before we move the money elsewhere.

How is that for privacy!

Personally, I think that some of the arguments that we hear today are similar to what happened when the first train came out. Namely, it was said that traveling at the never-before-heard speed of 20 MPH was not healthy for human beings!

No doubt, we will see more banks review the opportunities very carefully. Innovators are already tapping into the integrated data. Others will follow.

In some future edition of Competing on Analytics we may well hear about some bank that rode the opportunity out to their advantage.